As more Asian families settle in Australia, or send the next generation here to study and work, some begin to ask whether the family’s wealth should be overseen from Australia through a single family office. For a family whose investments, businesses and properties are spread across Singapore, Malaysia, Indonesia, Hong Kong, Taiwan, mainland China and Australia, a dedicated team can bring order, oversight and continuity.
A family office is not a legal structure in itself. It is a way of organising people, entities and decision-making. Setting one up in Australia raises questions of structure, financial services licensing, tax and governance that are worth considering before anyone is hired. This article outlines those questions in general terms. It is not financial, licensing or tax advice.
What a single family office does
A single family office serves one family. Its work commonly includes:
- Investment oversight – setting strategy, selecting and monitoring external managers, and consolidated reporting across countries and asset types;
- Accounting and administration – bookkeeping for family entities, bill payment, property management, insurance and record keeping;
- Coordinating advisers – working with lawyers, tax advisers, bankers and overseas advisers;
- Governance – supporting family meetings, a family council or constitution, and trustee and director decisions;
- Philanthropy – managing a family foundation or giving program; and
- Next-generation education – helping younger family members understand the family’s assets, values and responsibilities.
Common structures
There is no single correct model, but some patterns are common:
- An operating company that employs the staff, signs leases and contracts with service providers. It is often owned by a family trust or holding company.
- Separate investment entities – trusts, companies or other vehicles – that own the assets. Keeping the operating company separate from the investment entities can help manage liability, confidentiality and tax.
- Service agreements between the operating company and each family entity it serves, setting out the services and the fees.
Where offshore entities remain in place, the relationship between the Australian family office and those entities needs particular care, as discussed below.
Financial services licensing
Australian financial services laws may require a licence where a business provides financial product advice, deals in financial products, or provides certain custodial or investment services for others. A family office that recommends investments, places trades, or manages portfolios for family members and family entities may fall within those rules.
Some exemptions or alternative arrangements may be available for genuinely single-family arrangements, or where certain services are provided by licensed external providers. However, whether an exemption applies depends on how the family office is owned, whom it serves, what it does and whether it is paid. This needs to be checked before the office begins operating, and reviewed when the family or the services change, for example when in-laws or extended relatives are added.
Tax issues
- Fees and deductibility. The operating company generally needs to charge fees for its services on a sound basis. Whether those fees are deductible to the family entities that pay them depends on what the services are and how each entity earns its income.
- Cross-border pricing. If the Australian family office provides services to offshore family entities, the pricing of those services may need to meet arm’s length and transfer pricing requirements in Australia and in the other country.
- Residency of offshore structures. This is often the most significant risk. A foreign company may be treated as an Australian resident if its central management and control is in Australia, and similar concepts can apply to trusts. If the key investment decisions for an offshore company or trust are in practice made by the family office in Sydney or Melbourne, those entities may become Australian residents for tax purposes.
- Other attribution rules. Family members who are Australian residents may also be affected by rules that attribute income of controlled foreign companies and foreign trusts.
Families should obtain advice from a registered tax adviser, and from advisers in each country where entities are located, before the family office is set up.
Staffing, conflicts, confidentiality and data
- Staff. Employment contracts, delegations of authority, and clear limits on what staff can approve without family or trustee sign-off.
- Conflicts. Different branches of the family may have different interests. The family office needs a policy on whose instructions it follows and how conflicts are handled.
- Confidentiality. Clear rules on what information each family member can see, particularly for in-laws and younger members.
- Data and reporting. Privacy obligations, cyber security, and international tax reporting regimes such as the Common Reporting Standard, under which some family investment entities may have reporting obligations.
- Source of funds. Banks and service providers will usually ask for evidence of the source of wealth and funds. Organised records make this easier.
Governance
A family office works best when it serves a clear governance framework rather than replacing one. Common elements include an investment committee (which may include an independent member), written investment policies, regular reporting to a family council, and clear links between the family council and the trustees and directors who make the formal decisions. The family office should support those decision-makers, not quietly become the decision-maker.
When an outsourced option may be better
A single family office carries real fixed costs: staff, premises, systems, compliance and insurance. For many families, a multi-family office, a professional trustee company, or a coordinated team of external advisers may provide most of the benefits at a lower cost and with less regulatory burden. A staged approach, starting with a coordinating adviser and building up over time, is also common.
Composite example: an Indonesian family in Sydney
This is a composite hypothetical drawn from common situations. Names and details are invented.
The Wijaya family’s businesses are in Jakarta and Surabaya, held through Singapore companies. Two adult children now live in Sydney and want to set up a family office there to oversee the family’s global portfolio.
In planning, the family identifies three issues. First, if the Sydney office makes the investment decisions for the Singapore companies, those companies may be treated as Australian residents. Second, if the office recommends investments and manages portfolios for cousins and in-laws, financial services licensing may be required. Third, the parents in Jakarta want to keep final control. The family decides on a narrower Sydney office focused on reporting, administration and coordination of licensed external managers, with the Singapore boards continuing to meet and decide in Singapore, a written service agreement, and a family council that meets twice a year.
Frequently asked questions
Does a family office in Australia need a financial services licence?
It may. It depends on the services provided, who receives them and how the office is owned and paid. Some arrangements for a single family may not need a licence, but this must be checked carefully and reviewed as circumstances change.
Can running a family office in Australia affect our offshore companies and trusts?
Yes. If key decisions for offshore entities are in practice made in Australia, those entities may be treated as Australian residents for tax purposes. The scope of the family office and where decisions are made should be planned and documented.
Is a single family office worth it for our family?
It depends on the size and complexity of the family’s wealth and on the family’s goals. For many families, an outsourced or staged approach is more cost-effective. A feasibility review before committing to staff and premises is sensible.
How Chua Tan Associates can help
Chua Tan Associates advises families across Australia on establishing family offices and related structures, including operating company and trust structures, service agreements, family constitutions and councils, trustee and director arrangements, and estate planning. We are lawyers, and we work with registered tax advisers, licensed financial advisers and overseas lawyers so that licensing, tax and cross-border issues are addressed together. We advise in English, Mandarin and Cantonese.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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